This was the fourth consecutive quarter when the annual rise in HDFC Bank’s quarterly profit after tax was below 30 per cent. The rise in the bank’s quarterly net profits had exceeded 30 per cent (year-on-year) for about a decade, till the first quarter of 2013-14.

The Bloomberg consensus estimate for the bank’s net profit was Rs 2,326 crore.

For the quarter ended June this year, net interest income, or the difference between interest income and interest expenditure, was Rs 5,172 crore, up 17 per cent compared to a year ago and ahead of the Bloomberg consensus estimate of Rs 5,131 crore. At 4.4 per cent, the net interest margin was unchanged sequentially, but declined 20 basis points on an annual basis.

A fall in other income and muted loan demand capped the bank’s earnings growth. Other income (non-interest revenue) for the quarter was Rs 1,851 crore, compared with Rs 1,926 crore a year ago. A decline of about Rs 90 crore in foreign exchange and derivatives revenue at Rs 224.2 crore and sale of investments (a fall of Rs 174.5 crore) at Rs 25 crore more than offset the rise in income from fees, commissions and miscellaneous income.

“As a result of the challenging economic growth in recent years, the system loan growth fell to 13 per cent from a high of 20 per cent. Therefore, our net profit growth was around 20 per cent, unlike in the past, when it was over 30 per cent,” Paresh Sukthankar, deputy managing director of HDFC Bank, told reporters. He said he expected credit demand to pick up in the coming quarters, adding the bank was already seeing improvement in corporate and retail loan applications.

During the June quarter, HDFC Bank pared its provisions to Rs 483 crore from Rs 527 crore a year earlier, despite a rise in gross non-performing assets (NPA). The gross NPA ratio increased 10 basis points, both sequentially and on a year-on-year basis, to 1.1 per cent. The net NPA ratio, however, remained unchanged at 0.3 per cent. The bank has seen slippages in its farm loan, small and medium enterprise loan and commercial equipment and commercial vehicle financing portfolios.

HDFC Bank’s growth has been better than that of the sector. Advances increased 21 per cent to Rs 3,12,109 crore, while total deposits rose 23 per cent to Rs 3,72,074 crore. As of June-end, low-cost current account and savings account deposits accounted for 43 per cent of total deposits.

At the end of the June quarter, the bank’s capital adequacy ratio was 15.1 per cent, according to Basel-III norms, while its tier-I capital adequacy ratio was 11.1 per cent.

Earlier, HDFC Bank had announced plans to raise up to Rs 10,000 crore from the market. Sukthankar said the fund-raising would lead to a 2.5-3 per cent improvement in the tier-I capital adequacy ratio. “We have not yet taken a decision on whether we will raise the money from the domestic or the international market. It depends on the FIPB (Foreign Investment Promotion Board) approval. It will probably be a mix of both. We intend to raise the capital this financial year,” he said.

He denied any immediate plan of a merger between HDFC Bank and its parent, Housing Development Finance Corporation (HDFC). There has been speculation of a merger of the two after the Reserve Bank of India waived the mandatory reserve requirements for financing infrastructure and affordable housing projects through long-term bonds.

“There is no discussion at this point. The reserve requirement was a major hurdle (for the merger), but we have to see if the new guidelines address this. We are reviewing the circular. It will probably require clarifications. At this point, there is no plan for a merger,” Sukthankar said.

On Monday, the HDFC Bank stock closed at Rs 828.05 on BSE, down 0.53 per cent, against the Sensex’s 0.29 per cent rise.